Automation

Amazon's Robotic Future: A Work in Progress

If you were watching Bloomberg TV recently, you may have seen our correspondent, Cory Johnson, standing in the middle of Amazon’s (AMZN) newest distribution center in Arizona. It’s an impressive facility, brand-new and owned by one of the hardest-charging, most-innovative companies to come onto the retail scene since Sam Walton opened a five-and-dime.

So where are the robots?

After all, aren’t robots supposed to be the future of such places as distribution centers and warehouses? Didn’t Amazon buy a robot manufacturer, Kiva, in March? The online retailer announced in October that it was taking on 50,000 additional part-time workers for the holiday season. Shouldn’t some of those spots be taken up by mechanical arms and wheels?

Maybe not. For all the anxiety over robots coming to take jobs, there are still limitations to what they can do—or what they can do well. Bruce Welty is chief executive officer of Quiet Logistics, an order-fulfillment company that manages the online inventory and distribution for retailers like Gilt, Zara, and Bonobos. He uses robots made by Kiva, the company Amazon purchased, but his warehouse in Massachusetts is not bereft of humans. “Robots aren’t very good at picking up things,” he says. “They aren’t very good at looking at a bin of different things and distinguishing one item from another.”

Welty’s robots do one task and one task only: They move racks of merchandise to workers, who then remove the products from the racks and pack them up for shipping. Saving workers the time and effort to retrieve products offers considerable benefit. “In a typical warehouse, that’s about 60 to 70 percent of the labor,” Welty says.

In addition to what the current state of robotic arts does well, there are further reasons for the continued presence of human beings in warehouses. Labor flexibility is one of the larger ones. “Automation won’t help Amazon in periods of peak demand,” says Stephen Graves, a professor of management science at the Massachusetts Institute of Technology. “People are far more flexible.”

The capital expense to add robots means they need to make sense 12 months out of the year, not two. “The only way to handle spikes in demand is by adding temporary workers,” says Jim Tompkins, CEO of supply-chain consultancy Tompkins International. “If you bought a whole bunch of robots to handle the holiday shopping season, you’d have a whole bunch of robots looking at you, come January.”

So if Amazon just spent nearly a billion dollars buying Kiva, but the robots they produce can’t make a huge difference in how the company operates, what are Amazon’s intentions?

For starters, it’s still early. An acquisition like that of Kiva will take a while to digest, during which time new applications for the robots will surely be devised. “They’re really in a test mode,” says Welty. “They’re going to work on getting it right before any major rollout.”

The Kiva acquisition may have had as much to do with software as it does with hardware, adds Tompkins. “Mechanically, there’s nothing that special about Kiva,” he says. “But what they do have is software that makes sure the robots are in the right place at the right time. This was a software play.”

That’s not exactly how most people would view the deal. But it may be just the head-fake that Amazon CEO Jeff Bezos intended. “I bet Jeff Bezos loves that people are running around trying to put more robots in their distribution centers,” Tompkins says.